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A simple specification test for models with many conditional moment inequalities

Mathieu Marcoux, Thomas M. Russell and Yuanyuan Wan

Journal of Econometrics, 2024, vol. 242, issue 1

Abstract: This paper proposes a simple specification test for partially identified models with a large or possibly uncountably infinite number of conditional moment (in)equalities. The approach is valid under weak assumptions, allowing for both weak identification and non-differentiable moment conditions. Computational simplifications are obtained by reusing certain expensive-to-compute components of the test statistic when constructing the critical values. Because of the weak assumptions, the procedure faces a new set of interesting theoretical issues which we show can be addressed by an unconventional sample-splitting procedure that runs multiple tests of the same null hypothesis. The resulting specification test controls size uniformly over a large class of data generating processes, has power tending to 1 for fixed alternatives, and has power against certain local alternatives which we characterize. Finally, the testing procedure is demonstrated in three simulation exercises.

Keywords: Misspecification; Moment inequality; Partial identification; Specification testing (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:242:y:2024:i:1:s0304407624001349

DOI: 10.1016/j.jeconom.2024.105788

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